Cash-strapped realty players rush for QIPs to raise funds

Cash-strapped realty players rush for QIPs to raise funds
The Financial Express, June 3, 2009, Page 4

Sajan C Kumar, Chennai

A choppy stock market and a sudden crash in credit ratings are forcing a host of cash-strapped real estate companies to look for raising funds via qualified institutional placement (QIP) to get their business going. The companies that have already raised funds through the QIP route to improve liquidity include who-is-who in the real estate world — Unitech, Indiabulls, Parswanath among others.

According to market sources, a slew of real estate players have already mopped up close to $1 billion from foreign investors and deals worth another $2 billion are in the pipeline. “In the current market situation, institutional placement makes sense for real estate players as other means to raise funds are bleak. Also, the PE appetite for real estate companies has literally vanished leaving them with no other option but go for institutional placements,” said an analyst with a local brokerage house adding “this would also help them not to add to their swelling debt in their balance sheets”.

While Unitech Ltd has already raised $325 million, followed by Indiabulls Real Estate which raised $533 million, PTC India mopped up $106 million through QIP route. The board of directors of Parswanath Developers and HDIL recently gave approval to raise $530 million and $600 million, respectively, for their capital requirements.

Now, companies like Puravankara Projects, Hindustan Construction Company (HCC) and Shobha Developers are following the path of Unitech and Indiabulls, while a host of other real estate players, who are laden with high-cost debt are also contemplating QIP route to raise funds. Puravankara Projects is planning to raise $170million while HCC is to raise $318million. Another infrastructure giant Gamon Infra is in the process of raising $100million through institutional placements.

Analysts attribute the sudden appetite for institutional placement by to the current state of markets where most shares are trading at over 50% discounts to their issue price coupled with investor-friendly QIP regime introduced by Sebi.